Under new Land and Building Tax Law the income-based method previously used in tax calculation will be replaced by an assessment based on a property’s appraised value to improve the clarity of future tax calculations.
The Land and Building Tax Law will introduce two major changes in 2019 to tax calculations. A shift to a cost approach assessment Levying tax based on land use. Firstly, tax calculation using the cost approach under the new law is a transition from the previous income approach that heavily depended on officers’ assessment views. Under the new scheme, tax determination is based on the appraised value of the property, calculated from the sum of standard land and building prices set by the Treasury Department.
Appraised value of property deriving from separate standard prices of land and buildings will also help to minimise officers’ discretion in the assessment process, whilst the different land use purposes will have varying implications on tax treatment for property. The new Land and Building Tax Law came into effect on January 1st 2019, having both negative and positive effects on Thai property developers. Overall, the new law is likely to cause greater disruptions to those are renting property than those involved in selling property.
This approach separates the valuation of land and buildings, whereby the price of the latter varies with the type of construction. The renewal of both land and building costs are adjusted at four year intervals. Land use categories will be considered under the new tax module. Previously, tax rates were considered based on the annually appraised value of the asset. However, under the new tax law the same building may have different tax rates depending on the functions it serves. A two-story building used as a store on the ground floor and as a residential area on its upper level will be levied with a commercial and residential tax rate per the share of area each occupies.